The Aussie dollar’s plunge to a six-year low may not be all good news for the Reserve Bank.
While the Australian central bank spent much of this year calling for a weaker currency to help revive the local economy, the Chinese move to devalue the yuan that sparked the most recent drop underscores the dangers posed by a slowdown in the South Pacific nation’s biggest trading partner. It also risks fueling beggar-thy-neighbor actions in other countries and putting the brakes on a normalization of U.S. monetary policy.
China’s surprise change to its currency regime on Tuesday rippled through global markets as investors speculated the move was timed to combat the deepest economic slowdown since 1990 for the world’s most populous nation. The Australian dollar dropped 10 percent this year to 73.68 U.S. cents as of 10:30 a.m. on Thursday in Sydney, having touched 72.16 cents on Wednesday, a level unseen since April 2009.